Thursday, March 17, 2016

RPT-The Fed keeps rates but provides two increases this year – Boursorama

The Fed now has two rate hikes in 2016 * Moderate growth and risks still present * The markets greet a tone softer (Repeat without changing a telegram sent Wednesday) by Howard Schneider and Lindsay Dunsmuir WASHINGTON, March 17 (Reuters) – the Federal Reserve held Wednesday its interest rates unchanged, as expected, but hinted that moderate economic growth and dynamism of the labor market in the US could allow it to resume tightening its monetary policy later in the year. The US central bank, however, noted that the economy and the market remained exposed to risks related to global uncertainties, although new economic projections of its leaders show they expect two rate hikes by the end of December. “A series of recent indicators, including strong employment growth, suggest a continued improvement in the labor market. Inflation has risen in recent months,” the Fed said in a statement, adding the objective of maintaining rate “fed funds” at 0.25% -0.50%. “However, the evolution of the global economic and financial situation continues to pose risks” and should keep inflation at a low level this year, she added. The president of the Fed, Janet Yellen, welcomed the strength of the US economy in a global context still tense but said he wanted to wait for a confirmation of the recent rise in core inflation in the United States and the pursuit the improvement on the employment front. “The committee (monetary policy) deemed it prudent to maintain our position at this meeting,” she said. The institution therefore now provides two increases this year rather than four, which was his goal when it raised rates for the first time in nearly 10 years last December. “The decision to keep rates unchanged reflects the evolution of the global economy, caution is appropriate,” said Janet Yellen at the press conference following the announcement of the decisions of the Monetary Policy Committee of the Fed. The forecast two increases this year “reflects the forecast for global growth and a tightening of credit conditions,” she added. REVIEW OF GROWTH FORECAST DOWNWARD “Our first impression is that the tone seems slightly more flexible regarding forecasts”, analyzed for its part economist Tom Porcelli at RBC Capital Markets. The dollar fell against both the euro and the yen after the announcement of the Fed’s decisions. The NYSE, which moved close to balance, has turned up moderately. The index feature of Wall Street, the S & amp; P 500 .SPx, took 0.56% to finish at 2,027.22, its highest level this year. Sign of a peaceful climate, the CBOE volatility index .VIX has completed its lowest level since December. “The market was expecting two increases to the maximum this year and the adjustment of forecasts (the Fed) is in line with expectations,” said Randy Frederick, director of trading and the derivatives at Charles Schwab. “So yeah, basically, the market said it was right.” The Fed had particularly been cautious in its previous monetary policy meeting in January amid turmoil in financial markets, falling prices of oil and falling inflation expectations. The environment is now more calm, but the Fed is not getting carried away, as evidenced by the reduction on Wednesday its goal of long-term interest rates from 3.5% to 3.3%. The Fed also lowered its growth forecast for the US economy to 2.2% against 2.4% and its inflation forecast to 1.2% against 1.6%. However, it sees prices then rise to approach its medium-term inflation target of 2%. The central bank continues to predict that the unemployment rate this year will fall to 4.7% by the end of the year and continue to fall the following two years. The decision to leave rates unchanged was taken almost unanimously, only the president of the Kansas City Fed, Esther George, voting in favor of an increase. * The release of the Fed (Howard Schneider and Lindsay Dunsmuir; Marc Angrand and Patrick Vignal for the French service)

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